Property Market 2016

cnocbui

gaius c wrote: »

So stamp your feet and demand that buyers pay double the actual market value?

I don't think you get it. If you are not prepared to pay at least the cost of producing something, then that something will not get produced for long, if at all.

The idea that the 'market' can set a 'market value' that is less than the intrinsic costs of production is la-la-land fantasy.

cnocbui

El_Dangeroso wrote: »

Unless the providers are drowning in inventory and need cash. That's also how markets work sometimes.

Not for long they don't.

This oil example could hardly be more stupid and really shouldn't be applied to housing. Yes, oil is being transacted at less than it's cost of production, at the moment, in some instances, but for what percentage of the last 80 years has that been the case? A few weeks. It can't go on for long because it is an unsustainable aberration.

You can not have a Housing market, and expect new stock to be added to it, if the 'market' doesn't want to even pay the basic cost of construction. What chumps are going to build houses and sell them to you and others at a loss as part of a sustainable business model?

jay0109

cnocbui wrote: »

What chumps are going to build houses and sell them to you and others at a loss as part of a sustainable business model?

Me and you i.e the Taxpayer

Fkall

gaius c wrote: »

So stamp your feet and demand that buyers pay double the actual market value?

it would seem that it is the buyers who are stamping their feet and demanding lower prices

quadrifoglio verde

PhoenixParker wrote: »

If landlords are selling up in droves as is claimed where is the corresponding increase in properties for sale?

Population growth
There's more people living in Dublin today than there were 10 years ago and supply of housing has lagged this

Bob24

cnocbui wrote: »

I don't think you get it. If you are not prepared to pay at least the cost of producing something, then that something will not get produced for long, if at all.

The idea that the 'market' can set a 'market value' that is less than the intrinsic costs of production is la-la-land fantasy.

Or the production structure will have to adjust to lower prices. Appart from maybe the raw material and the equipement, the cost is mostly made up of factors which don't have their value set in stone (if I dare say): various taxes and levies, wages, land value, margins, regulations, productivity, etc are all depending on the local context which can change depending on how the country is doing, rather than external factors which are out of control. If it is technically possible to sell a decent brand new 2 bed apartment* in an average French city for 130K (with France's crazy taxes and regulations), why would the same thing have an intrinsic and unshrinkable construction cost of double that price in Ireland? I know we are a small Island which will increase the costs a bit ... but it can't explain that much of a difference.


Or ... if most prospective buyers can't afford to pay (which currently is the case) and you are right and the industry isn't able to reduce construction costs, something is just deeply wrong with Ireland's economic model.

* I picked a city I know, 120k of population, the ad is real with a realistic price, the location is just out of town on a public transport hub and is not a dump.

Zenify

cnocbui wrote: »

I don't think you get it. If you are not prepared to pay at least the cost of producing something, then that something will not get produced for long, if at all.

The idea that the 'market' can set a 'market value' that is less than the intrinsic costs of production is la-la-land fantasy.

I have been looking at property in south Dublin and North Wicklow and I can assure you the cost is way above raw materials. I understand this does not represent the whole Country. However, a major cost to these builders is the land and if prices of houses drops, builders will bid less for land thus reducing their costs. Is this not right?

cnocbui

Zenify wrote: »

I have been looking at property in south Dublin and North Wicklow and I can assure you the cost is way above raw materials. I understand this does not represent the whole Country. However, a major cost to these builders is the land and if prices of houses drops, builders will bid less for land thus reducing their costs. Is this not right?

Here you go: 120 m² 4 bedroom semi - €149,500 - and that's the ASKING price!!!! Society Of Chartered Surveyors estimate to build the house - €168,120 - That means that not only are you getting the building at - lets be realistic and knock 5K off - a €24,000 discount, but you are getting the land it sits on for free as well as the tarmac, garden etc!

That is economic madness. You could not buy the land and build the house on it for anywhere near the cost of buying that. And people want houses to be cheaper?

Goat Paddock

cnocbui wrote: »

Here you go: 120 m² 4 bedroom semi - €149,500 - and that's the ASKING price!!!! Society Of Chartered Surveyors estimate to build the house - €168,120 - That means that not only are you getting the building at - lets be realistic and knock 5K off - a €24,000 discount, but you are getting the land it sits on for free as well as the tarmac, garden etc!

That is economic madness. You could not buy the land and build the house on it for anywhere near the cost of buying that. And people want houses to be cheaper?

The house in your example is in tipperary however.

Zenify

cnocbui wrote: »

Society Of Chartered Surveyors estimate[/URL] to build the house - €168,120 - That means that not only are you getting the building at - lets be realistic and knock 5K off - a €24,000 discount, but you are getting the land it sits on for free as well as the tarmac, garden etc!

That is economic madness. You could not buy the land and build the house on it for anywhere near the cost of buying that. And people want houses to be cheaper?

I understand that maybe for parts of the country but as mentioned in my post I said south Dublin and North Wicklow. I'd be very happy if the houses there were anything near 150k.

Bob24

cnocbui wrote: »

That comes under the heading of 'if wishes were fishes'. Yes, a lot of the inputs 'could' have their costs lowered. Let me know when plumbers have agreed to work for €15 an hour.

I wouldn't imagine French plumbers accept this either (if you take into account their salary and employer social security payments, they are probably twice as expensive per hour as an Irish plumber). Yet the exemple I quoted does exist because it is a combination of factors and you are only looking at one of them ...

cnocbui wrote: »

Something is deeply wrong with Ireland's economic model - it's called the government. They suck so much out of individual wage and salary earners in the form of taxes, charges and levies, people are just not able to accrue the funds necessary to buy accommodation.

I do agree something is wrong, but I would question whether the problem is the one you are pointing at.

See page 9-10 there: http://europeanreform.org/files/New_Direction_-_2014_Tax_Burden_of_Typical_Workers_in_the_EU.pdf

As of 2014, Ireland had the 2nd lowest tax burden in the EU for a worker on the national average wage, only behind Cyprus and equivalent to Malta.

If tax burden was the main driver, the Belgians (the ones getting milked the most with 59.6% effective tax rate) would be doomed compared to the Irish (32.16%) when it comes to buying property. Yet, many other Europeans countries don't seem to have the Irish property issue.

cnocbui

Goat Paddock wrote: »

The house in your example is in tipperary however.

Zenify wrote: »

I understand that maybe for parts of the country but as mentioned in my post I said south Dublin and North Wicklow. I'd be very happy if the houses there were anything near 150k.

Dublin is a capital city. The laws of supply and demand apply. Land is hugely expensive in capital cities in all countries. It would be interesting to know why the building cost of that same house would be €220,440 if it was to be built in Dublin.

So what does a patch of vacant land in South Dublin you could build that house on cost?

OfflerCrocGod

cnocbui wrote: »

This oil example could hardly be more stupid and really shouldn't be applied to housing. Yes, oil is being transacted at less than it's cost of production, at the moment, in some instances, but for what percentage of the last 80 years has that been the case? A few weeks. It can't go on for long because it is an unsustainable aberration

Actually oil is an interesting parallel, that market tanked hard once it was clear that Opec wouldn't try to control the price. Turned out that in fact oil shouldn't have been as expensive as it was once the presumption of interference in the market was removed. One of the issues in Ireland might be access to land, permission to build on it and our use of land. With land reform we could see the cost of new homes dropping.

The SCSI calculator is based on the current housing regulations, a 20 year old C/D rated house wouldn't cost as much to build as a new A rated one.

Villa05

Bob24 wrote: »

Or the production structure will have to adjust to lower prices. Appart from maybe the raw material and the equipement, the cost is mostly made up of factors which don't have their value set in stone (if I dare say): various taxes and levies, wages, land value, margins, regulations, productivity, etc are all depending on the local context which can change depending on how the country is doing, rather than external factors which are out of control.


Or ... if most prospective buyers can't afford to pay (which currently is the case) and you are right and the industry isn't able to reduce construction costs, something is just deeply wrong with Ireland's economic model.

An example of the crazy costs that have to be factored in to Construction costs in the Republic and are deemed by many to be still inadequate.

Costs have risen on the back of new building specifications and a certification regime that puts the onus of regulation on the architect. “If you’re an architect that means, instead of visiting projects every 10 days or two weeks, you have to be there every day to make sure every single aspect comes up scratch,” Lyons says.
This is estimated to add about €25,000 to the cost of each home. In Northern Ireland, where certification is still done by local authorities, the cost to the developer is £200.

Oddly enough, you never hear of building on flood plains, Pyrite, or closure of relatively new builds due to breachs in fire safety in Northern Ireland.

Strangely, in the Republic when these incidents occur there seem to be no consequences for the people responsible, the cost of rectifying is passed on to taxpayers or mothballed into levies on construction/materials further increasing the cost of construction.

Why is there no accountability? Breaching fire regulations is surely attempted manslaughter. In the medical device industry an operator is criminally liable for negligence in the performance of their duties. Why are these people getting away with it?

cnocbui

Villa05 wrote: »

Strangely, in the Republic when these incidents occur there seem to be no consequences for the people responsible, the cost of rectifying is passed on to taxpayers or mothballed into levies on construction/materials further increasing the cost of construction.

Why is there no accountability? Breaching fire regulations is surely attempted manslaughter. In the medical device industry an operator is criminally liable for negligence in the performance of their duties. Why are these people getting away with it?

In a word - libel.

The libel laws in this country facilitate and empower corruption. This country has just as much of an endemic problem with 'face' as do countries like Malaysia - which is also inherently corrupt from top to bottom.

The recent banking cover-up would be an example of 'why'.

If you know the joke about the Gaelic equivalent word for mañana - well it would be the same for 'consequence' - the concept doesn't exist.

Cuddlesworth

Zenify wrote: »

However, a major cost to these builders is the land and if prices of houses drops, builders will bid less for land thus reducing their costs. Is this not right?

No. There is no ongoing cost in holding undeveloped land. So no incentive for the land owner to sell unless they needed the cash. Taxation could fix that, but I'd see it as a opportunity for local councillers to abuse it.

cnocbui wrote: »

Here you go: 120 m² 4 bedroom semi - €149,500 - and that's the ASKING price!!!! Society Of Chartered Surveyors estimate to build the house - €168,120 - That means that not only are you getting the building at - lets be realistic and knock 5K off - a €24,000 discount, but you are getting the land it sits on for free as well as the tarmac, garden etc!

That is economic madness. You could not buy the land and build the house on it for anywhere near the cost of buying that. And people want houses to be cheaper?

I used that calculator earlier in the thread as a rough example that houses do not cost such a large amount of money to build as what was being claimed by some articles. Large builders can cut the costs far lower. You don't pay the same price for buying 1000 toilets, as opposed to replacing 1 especially when you just buy them off the factory that makes them and store them on site. Same with all the materials.

quadrifoglio verde

Cuddlesworth wrote: »

No. There is no ongoing cost in holding undeveloped land. So no incentive for the land owner to sell unless they needed the cash. Taxation could fix that, but I'd see it as a opportunity for local councillers to abuse it.



I used that calculator earlier in the thread as a rough example that houses do not cost such a large amount of money to build as what was being claimed by some articles. Large builders can cut the costs far lower. You don't pay the same price for buying 1000 toilets, as opposed to replacing 1 especially when you just buy them off the factory that makes them and store them on site. Same with all the materials.

There is an opportunity cost however

Eugene Norman

cnocbui wrote: »

No. Voodoo economics is saying that if a piece of land costs €80 K, and a house is built on it for a construction cost of €320 K, the resulting property is worth €250,000 because that is all people 'want' to pay for it.

cnocbui wrote: »

Here you go: 120 m² 4 bedroom semi - €149,500 - and that's the ASKING price!!!! Society Of Chartered Surveyors estimate to build the house - €168,120 - That means that not only are you getting the building at - lets be realistic and knock 5K off - a €24,000 discount, but you are getting the land it sits on for free as well as the tarmac, garden etc!

That is economic madness. You could not buy the land and build the house on it for anywhere near the cost of buying that. And people want houses to be cheaper?

Why would you pick a small recession hit town in Tipperary to prove you thesis?
If property in Dublin was at the price, or a relatively sane premium, people wouldn't be complaining now would they.

cnocbui

Eugene Norman wrote: »

Why would you pick a small recession hit town in Tipperary to prove you thesis?
If property in Dublin was at the price, or a relatively sane premium, people wouldn't be complaining now would they.

Because Dublin isn't Ireland or the whole universe. Also, I don't live in Dublin.

Every OECD capital city has the same problem, and many cities that aren't 'capital' likewise. Dublin too expensive? - try London, Paris Hong Kong, Sydney, etc.

You could grab this and build a house on it for another €258K, bringing you up to €353 K in total, which seems like a bargain compared to this, for another €242K on top of that.

So it looks like my example is not applicable to Dublin. So why aren't people snapping up bits of land like that and building on them? It would appear to be a cheaper option.

Villa05

cnocbui wrote:

Every OECD capital city has the same problem, and many cities that aren't 'capital' likewise. Dublin too expensive? - try London, Paris Hong Kong, Sydney, etc.

Every time I see these city comparisons, it reminds me of Del boys van

New York, Paris, Peckham

Maybe it's our famous inferiority complex

Cuddlesworth

cnocbui wrote: »

So it looks like my example is not applicable to Dublin. So why aren't people snapping up bits of land like that and building on them? It would appear to be a cheaper option.

Site is right beside a school. Planning expires in under a year. Because of its location, accessibility and the fact that multiple neighbors lodged objections, there would be significant costs involved with the build that would not be encountered in sites where space is not a limiting factor.

yqtwqxqm

Villa05 wrote: »

Every time I see these city comparisons, it reminds me of Del boys van

New York, Paris, Peckham

Maybe it's our famous inferiority complex

I agree. I think its very funny that people think that because we are Irish it should somehow be different in our capital to every other capital city.
Dublin is where the bulk of the jobs are, and where people want to live. Same as any other capital city its going to have a premium for accommodation, buying or renting.

gaius c

cnocbui wrote: »

I don't think you get it. If you are not prepared to pay at least the cost of producing something, then that something will not get produced for long, if at all.

The idea that the 'market' can set a 'market value' that is less than the intrinsic costs of production is la-la-land fantasy.

Or the buyers don't have the financial resources to prop up a bubble era business model.

gaius c

Cuddlesworth wrote: »

No. There is no ongoing cost in holding undeveloped land. So no incentive for the land owner to sell unless they needed the cash. Taxation could fix that, but I'd see it as a opportunity for local councillers to abuse it.

But they might crystallise a loss if they were forced to build on it and we can't have that now, can we?

gaius c

OfflerCrocGod wrote: »

Actually oil is an interesting parallel, that market tanked hard once it was clear that Opec wouldn't try to control the price. Turned out that in fact oil shouldn't have been as expensive as it was once the presumption of interference in the market was removed. One of the issues in Ireland might be access to land, permission to build on it and our use of land. With land reform we could see the cost of new homes dropping.

The SCSI calculator is based on the current housing regulations, a 20 year old C/D rated house wouldn't cost as much to build as a new A rated one.

Very good points. Doubt they will get addressed. The replacement cost argument postulated by builders is a tautology because they are comparing houses built 50 years ago with modern builds.

Also the whole oil price discussion is nonsense because the "right" value of oil was something that was false in itself and the cost of production arranged itself around that.
Similar problem for building here.

Goat Paddock

What is the feeling on the trajectory of apartment prices in South Dublin region over the next while,say two beds.

Bob24

Goat Paddock wrote: »

What is the feeling on the trajectory of apartment prices in South Dublin region over the next while,say two beds.

Not sure I want to risk making predictions, but I have been following exactly these (2 beds in South Dublin) and can give a bit of history. There had been a steady and regular price increase in 2014 and until mid 2015. But I think this has stopped now. However asking prices are still rising at a much slower slower pace than they used to (unfortunately I haven't been monitoring actual selling prices recently).

If I had to take a guess, I'd say it will keep rising but slowly, or possibly stabilise. I would not expect prices to go down as I think there is decent enough demand.

Goat Paddock

Bob24 wrote: »

Not sure I want to risk making predictions, but I have been following exactly these (2 beds in South Dublin) and can give a bit of history. There had been a steady and regular price increase in 2014 and until mid 2015. But I think this has stopped now. However asking prices are still rising at a much slower slower pace than they used to (unfortunately I haven't been monitoring actual selling prices recently).

If I had to take a guess, I'd say it will keep rising but slowly, or possibly stabilise. I would expect price to go down as I think there is decent enough demand.

Thats bad news then ours was bought mid 2015 at your peak :pac:

percy212

Villa05 wrote: »

Every time I see these city comparisons, it reminds me of Del boys van

New York, Paris, Peckham

Maybe it's our famous inferiority complex

I know. It makes me laugh. Dublin! Paris! NYC! Joke. It's Dublin! Cardiff! and maybe Glasgow!

gaius c

Goat Paddock wrote: »

Thats bad news then ours was bought mid 2015 at your peak :pac:

Maybe not. The market is not uniform and there's more to buying a home than buying it at the exact lowest price point in a market cycle. Also, just because the overall cycle is "up" doesn't mean you didn't bag yourself a good deal.